Pew Encourages Access to Safe Small Home Loans for Underserved Communities

On Feb. 16, The Pew Charitable Trusts sent a letter to the Federal Reserve Board in response to its request for comments on updating its Community Reinvestment Act (CRA) rules to reflect the changing nature of bank operations, especially the expansion of online offerings designed to make financial products and services available to more customers across the country. Congress intended the act, which first passed in 1977, to encourage banks to meet the credit needs of the communities where they operate, particularly in low- and moderate-income neighborhoods. Under the CRA, regulators evaluate financial institutions across key areas, including small business investment and consumer loans, and consider the findings when reviewing a bank’s request to expand its operations and activities.

Pew’s comments focused on two key aspects of the board’s proposal: the importance of the CRA in encouraging lenders to originate small mortgages as a mechanism to address the dearth of such loans in the market, and the need for CRA guidance to include manufactured housing—the largest source of unsubsidized affordable housing in the U.S. Pew praised the board for considering how a CRA evaluation affects the origination of small mortgages and how the act could be changed to expand credit access in underserved communities. But the letter also noted the lack of discussion of manufactured homes in the rulemaking proposal and offered a range of strategies to make credit for this important source of housing safer and more affordable.